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g-Spiriva approval potential growth driver for North America business

* Lupin (LPC) received the much-awaited USFDA approval for g-Spiriva. Since it is a niche product in the inhaler space, it is expected to boost sales in North America.

* We estimate annual sales of USD80-100m from this opportunity in FY24/FY25.

* We raise our FY24/FY25 earnings estimates by 6%/8% to factor in the upside in earnings from g-Spiriva. We value LPC at 22x 12M forward earnings to arrive at a TP of INR700. While g-Spriva is expected to be a strong earnings booster for LPC over the next two years, we remain concerned about the performance of its core business. Moreover, the valuation at 36x/26.5x FY24E/FY25E PAT adequately factors in the earnings upside. Maintain SELL

g-Spiriva USFDA approval a strong boost to NA sales

* The US market size of Spiriva at the gross level is USD1.3b for the 12 months ended in Mar’23, as per IQVIA. The net sales level market size is about USD500m.

* g-Spiriva is indicated for the long-term, once-daily, maintenance treatment of bronchospasm associated with chronic obstructive pulmonary disease (COPD), including chronic bronchitis and emphysema.

* While the market size remains encouraging, the prescription trend indicates a downtick due to a shift to alternate products.

* Particularly, Innovator already has Respimat at the commercial level, which is more advantageous than Spiriva. Respimat is a multi-dose, preloaded Inhaler, whereas Spiriva requires patients to load each dose of capsule into the inhaler prior to use.

* Further, the genericization of Albuterol, Fluticasone/Salmeterol has provided other options for the same indication as that for Spiriva. ? Based on the above factors and scope of authorized generics for g-Spiriva, we expect LPC to garner annual sales of USD80-100m from g-Spiriva in FY24/FY25.

Overall US pipeline pending for approval and USFDA inspection highlights

* In FY23, LPC filed 29 ANDAs and received approval for 16 ANDAs.

* In addition to g-Spiriva, LPC is strengthening a niche pipeline in injectables and inhaler space. Particularly, LPC filed four injectables in FY23 and is on track for g-Respimat/g-Ellipta in FY25.

* On the regulatory front, LPC has received VAI/NAI at its Somerset/Parvada plants.

* It has received Form 483 for its Mandideep, Nagpur, and Pune plants, while it has received OAI classification at its Tarapur plant

Valuation and View

* We raise our FY24/FY25 earnings estimates by 6%/8% to factor in the earnings upside from g-Spiriva. We value LPC at 22x 12M forward earnings to arrive at a TP of INR700. Even after factoring in g-Spiriva-led upside in earnings, returns ratios move to high single digits over FY23-25. The valuation at 36x/26.5x FY24/FY25 PAT adequately factors in the earnings upside. Maintain SELL.

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